Municipal Bankruptcy?

By Mitchell Vexler, December 22, 2025

Prepared for: SEC Washington & Texas Attorney General Ken Paxton

Issue: Conroe Texas - Hyatt Regency Convention Center 1001 Grand Central Pkwy, Conroe, TX 77304.

Evidence: Curve fitted reports to achieve the desired goal which ended up in fraudulent bonds.

Emblematic of: School District bond fraud. See the Amicus Brief.

Outline:

1. With regard to the Hyatt Regency Conroe Hotel and Convention Center, there is no profit after debt service and debt service cannot be completed given the current structure, ownership, operator and debt load. The project is bankrupt.
2. One of the most ill-conceived real estate projects I have ever seen, and I have studied thousands of business models.
3. The Conroe Hyatt Regency (a conceived 4 Star Full Service Hotel) is expected to generate an estimated revenue of $14.7 million in 2025, with operational costs around $12.6 million, indicating a potential net income of approximately $2.1 million (less than a 2 star select service hotel).
4. The restaurant is losing money.
5. The convention space is losing money, and the hotel is losing money.
6. The ADR (Average Daily Rate) would need to be at least $325 and north of 80% occupancy to put the property into the black. The cost of carrying the debt adds to the overall cost of the project.
7. City of Conroe reserve funds (your tax dollars) have been used to cover debt service payments, meaning more money was flushed down the drain rather than face reality.
8. The hotel has a substantial debt of approximately $144 million. This does not include the present value of the future bond liabilities or other debts.
9. Projections of profitability were fantasy. Who got the fees? 
10. There is no evidence in the CBRE report that the math ever worked. 
11. There is no evidence of proper “what-if” due diligence being done. Capital allocation is literally 100%, with no margin of safety. This occurred as a result of greed that became multiplied by the people and entities involved. 
12. The alleged proforma income and expense statement is pure fiction.  How could a 4 Star full-service hotel succeed when all the evidence in the marketplace only supports a 2 star limited service product?
13. Creating value where none existed in the initial land acquisition, marking the value up, and then creating a ground lease can be seen as compounding the fraud. In addition, the math on ground lease becomes problematic when the revenue generated from the hotel can’t keep up with the annual increases in ground rent plus all the other inflationary items.
14. Allegedly there is $2.1 million in NOI which would indicate a value around $18 million. However, that appears to be before the current debt payments for the bonds, and ground lease payment which allegedly is over $3.8 million on the bonds.
15. From the municipal financials, I do not believe the City has the money anywhere to stroke a check for the entire amount of the bonds to zero them out.
16. To meet the debt payments the property needs to be producing at lease $14.7 million in NOI. Therefore, the property is short 85% of the minimum needed NOI.
17. There is not a single entity in the chain that acted in the best interest of the City or the taxpayers including the City of Conroe. 
18. They acted on the sole basis of their pocket and or ego.
19. We will see how this plays out but there is a high probability that the bond holders will file suit against the City of Conroe, and discovery will be done which will show more than what we uncovered and turned over to the SEC. Criminal charges may be forthcoming, and the City of Conroe may need to file bankruptcy as Detroit Michigan did.
20. The project and reports were curve-fitted to promote an outcome which was not then or now ever in the realm of probability.
21. Neither the City nor the Taxpayers have the money to pay the debt created for this Hyatt Regency Convention Hotel.
22. If there are 3 Vendors who are owed money, they can file the property and ownership into involuntary bankruptcy.
23. There are multiple people and entities that may have to file bankruptcy. 
24. Criminal Charges and Civil lawsuits against the Bond Underwriters, Public / Private Partnership promoter, Co-Conspirators within the City, for Accounting Fraud, Bond Fraud, State and Federal violations of laws including RICO – Creating a false debt and demanding payment. They demanded payment from the property owners / taxpayers, used reserve funds which appear not to have been part of the hotel funds, and the debt appears false from inception. Given the number of entities and people involved, the SEC and AG might look at this situation as a conspiracy to defraud and issue an immediate preservation of records to any and all participants.
25. Hyatt received a management contract for many years. Why did Hyatt as the operator not warn of the issues? It is not good enough to state they relied on CBRE. Were they blinded by the fees – regardless of profitability of the hotel?
26. The author of the CBRE report, claims “I’ve done a lot of forensics” and then blames the problem on lack of working capital. Yet, the report may be seen as grossly inaccurate, or worse. How could the report not have the necessary working capital included? Who was the author of the report working for and when? How much money was paid in fees to those entities and people involved? As the bankruptcy of a City is at risk, a preservation of records including emails should be a top priority.
27. “Are we going to have to think about having a bond election to cover the $16 million dollar bonds?” Raising money to cover defaulted bonds is a Ponzi scheme not to mention multiple violations of securities laws. Which raises the question of the disclosures on the initial bond raise. Was the ground lease, proforma short of working capital, proforma plug numbers, fee schedule, contractor involvement, financial engineering disclosed to the potential bond buyers? What due diligence did the bond rating agency do? What due diligence did the bond underwriter do? 
28. Who gets hurt by this Institutionalized Systemic Moral Hazard and the fallout from the crimes? A) Property Taxpayers, B) Sales Taxpayers, C) Bond Holders – Pensions and Municipal Bond Investors, D) Society – Municipalities participating in these schemes cannot be trusted. DAs who refuse to open an investigation cannot be trusted. 
29. Who should be held liable? Perhaps, given the evidence so far, the AG and SEC should open a criminal investigation on every entity and person in the chain including Hyatt, CBRE, City of Conroe, City of Conroe Council, PPP Entity Garfield, Bond Rating Agency, Bond Underwriters, co-conspirators etc. 
30. With the 650 page report plus the testimony seen in this video, there is no other conclusion than intent to defraud and they did it because they believe the taxpayer would never find out. Regardless of maybe an initial potential position of “build it and they will come” there are fiduciary obligations, ethics, oath of office and laws which should be examined and adjudicated by a jury and a Judge. This pattern and practice of Institutionalized Systemic Moral Hazard is playing out not just in Conroe but across the U.S. regarding 1.) Public Private Partnerships, 2.) School District Bond Fraud, and 3.) Economic Development Commissions. The common nexus between all 3 is the fraudulent overvaluation and over taxation of property tax which in consistently being increased year over year (up on average 100% in 5 years) to cover up the frauds (initial principal) plus the compound cumulative interest on that principal, and this is more fuel to the evidence that I have already delivered to the FBI, DOJ, SEC, Attorney General of the State of Texas, and the Courts.
31. I can’t be any clearer. Property Tax is illegal and under the U.S. Constitution and creates Institutionalized Systemic Moral Hazard leading to more bond fraud which is illegal under all States laws.
32. Who would loan any City that has committed Bond Fraud? Who would loan a School District that has committed Bond Fraud? Why should the taxpayers ever agree to a property tax to back what may be adjudicated as a conspiracy to defraud in the case of the Hyatt Regency Conroe? The taxpayers have every right to insist the City file for bankruptcy and demand that their DA prosecute those responsible. Typically, the District Attorneys do not want to prosecute their boss, being the City which is a problem and one more reason why Property Taxes must be eliminated because it stops all these frauds and fraudsters from spending money that is not theirs and never was theirs to spend as the voters did not have a vote in what project their money was being spent. The DAs have allowed and contributed by non-enforcement of the laws, to the Institutionalized Systemic Moral Hazard we all now recognize is occurring. Repeal all property tax and the CADs, ARBs, School District Supervisors, Boards, Tax Assessor Collector, & Economic Development Commissions are all wiped out thus eliminating higher increases in tax rates, and the resulting tax lien foreclosures, and or 37.8% of the household population going bankrupt or losing the roof over their head because the median household income does not exist to pay for their crimes. The only solution is the repeal of property tax in favor of the Uniform States Sales Tax allowing all property owners to own their property in perpetuity. See Benefits of Eliminating Real Estate Tax in Favor of Uniform States Sales Tax.  
33. Economic development commissions and PPPs are notorious for lack of transparency, ineffective use of incentives, and difficulty in measuring the success of their programs. These issues lead to wasting tax dollars and failure to achieve intended economic growth outcomes as well as kickbacks in the form of political contributions and or construction contracts.
34. Most Public Private Partnerships are nothing more than financial engineering on the back of Mom and Pop. If the project cannot be viable without financial engineering and without conventional financing or on a cash only basis, by those looking to sponsor and or promote the project, then the project should not be built in the first place. The Conroe Hyatt Regency is the poster child for alleged responsible parties turning a blind eye to reality in order to transfer the public’s tax dollars into their pockets and believing they are protected from exposure, thus the creation of Institutionalized System Moral Hazard.
35. EDCs & Public Private Partnerships lack accountability, and  many commissions operate without sufficient oversight, leading to a lack of accountability for their actions and decisions. This results in inefficient use of tax dollars and failure to meet development goals. 
36. Economic development commissions and PPPs frequently rely on tax incentives to attract businesses. However, these incentives usually do not significantly influence a company's decision to relocate or expand. 
37. Picking winners and losers leads to current businesses being disadvantaged by their own politicians who control the EDCs and your tax dollars go to support a business that you have no vote over or say over.
38. Studies suggest that a large percentage of investments subsidized by tax incentives would have occurred without tax incentives or promotions, indicating a waste of public tax dollars. If the projects could not survive without the tax incentives, then they should not be done.
39. Commissions often engage in competitive very public bidding wars to attract businesses, which can lead to a zero-sum game where one area gains at the expense of another. A public bidding war makes for interesting press but the public pays for the shenanigans which is part of the intent to defraud. This competition drains local resources without generating net economic growth.
40. EDCs are nothing more than a make work program that is paid for by your tax dollars without any true oversight from which a go / no go decision can be properly made. What person on an EDC or PPP has any knowledge of hotel operations or ability to determine fact from fiction? What incentive do they have to determine fact from fiction? What due diligence, internal or external, was made by the promoter of the PPP or EDC to determine that the CBRE report lacked information? Who hired who, when and why? Without proper assessment, apparently by intent, the project could never achieve the intended outcome and as a conceived project was bankrupt before the shovel went in the ground. I have seen this before with a hotel in Dallas wherein I attended both Board of Variance and City Council meeting with a 37 page detailed warning. The warning was ignored. The developer after stating to Council, “I’m a rich man and I will do what I want”, went vertical, never finished the project, and now the City and the owner who bought the property has a pending demolition issue. The developer lost roughly $53 million and the neighborhood is stuck with a blighted steel skeleton. It is interesting that the person acting as the liaison between the City of Dallas and that hotel developer used to work as a planner for the City of Dallas. What did he know about hotel operations? Nothing, but he certainly knew enough to get paid, regardless of outcome. Hmmm… just like the EDC, PPP, those who wrote the reports and those who promoted the Hyatt Regency in Conroe. On this same vein, the CADs often write self-congratulatory letters between its membership in organizations and those who are on the payroll. Complexity creates dishonesty and without the home owners’ involvement in local municipal and school district issues, the door to steal your money is herein proven to be wide open, in clear violation of dozens of laws.
41. The purpose of a proforma in the hotel environment is to stack multiple financial statements from varying departments of income to determine the viability of future financial performance, including every unusual or nonrecurring transaction. It is the consideration of “what if” scenarios. A proper proforma helps assess the anticipated impact on cash flows and overall financial health. Utilizing plug numbers in a proforma / report such as a simple restaurant income is $X / month, it meaningless as the plug number did not take into account revenue per hour, operating expenses per hour, seat count, type of restaurant, employees per hour – per seating, average ticket per seating, cost of goods per seating, special events, available parking etc. Nothing about the Hyatt Regency (a 4 Star hotel) in Conroe Texas from the initial financial reports to the finished product was or is viable today and it all started with a failed idea promoted up the chain for the purpose of generating fees.
42. Ineffective programs with limited transparency by intent (complexity) leading to misallocation of funds without liability creates Institutionalized Systemic Moral Hazard. There is only cost and no benefit to the taxpayers that provided the capital both current and future to pay for the bonds. Thus, fraud on the taxpayers.
43. Limited transparency is by design, and the intent is to transfer taxpayer’s money into fees and pet projects and perhaps political contributions. Either way the truth is hidden from the taxpayers until the bonds can’t be paid for and the City, in this case Conroe, may be facing its own bankruptcy as a result. Do you know where your city has put your money? How many hundreds of billions across the U.S. are in similar positions as Conroe?
44. The initial conceptual decisions are made based on the delusion that the taxpayer revenue is bottomless and those responsible for the crimes would not be prosecuted and would claim, “we didn’t know”, or “I did forensics and I did a good job” or any myriad of other lies to cover up the criminality.
45. There is no reason to run a new detailed 100 page + proforma today because it is shockingly simple; Liabilities > Assets = Bankruptcy. Those who participated in the fraud should be prosecuted both civil and criminal with the goal to claw back as much money as possible for the taxpayers.
46. The Hyatt Regence Conroe is not a one-off situation. The pattern and practice as stated herein is clear and there is a high probability that if your city has an EDC, PPP and utilized property tax dollars as giveaways, for pet projects, your tax payer money was shoved down a black hole with no return on investment and you the taxpayer are on the hook to pay for the liabilities these criminals created. 
47. Look at the property tax record on the hotel owned by the City. Part of the process to obtain the PPP is to forgive the tax and monetize that today with discounted value. The money did not then, in the CBRE Proforma, or now exist to pay the property tax. https://actweb.acttax.com/act_webdev/montgomery/showdetail2.jsp?can=800760&ownerno=0  Although $0 tax is charged or due, notice the claimed value of $45 million as compared to the cost to build and as compared to the bonds outstanding and the cumulative interest due on those bonds. In addition to the property tax (effective 100% rebate) another unfair advantage for competing businesses is a rebate of the hotel sales tax which in Texas is an additional 6% on top of the 8.25% sales tax. The Conroe City Council for the Hyatt Regency pursued property tax rebates as well as hotel occupancy and sales tax rebates. With zero real estate tax, and even if zero sales tax, the hotel is not economically viable.   While we are on the topic of hotel sales tax, Texas cities impose combined state and local hotel occupancy taxes ranging from 15% to 17.5%. These additional sales taxes exist to feed other non-productive entities such as the EDCs and Tourism Bureaus. These high rates do the exact opposite of the sales pitch given by the Tourism bureaus and EDCs in that they deter tourists, thus reducing overall visitor spending in local economies while those working in the bureaus and EDCs get paid. The EDCs and Tourism bureaus do not exist for the benefit of the hotel operators; they exist for their own benefit as there is no efficiency of the dollars spent to attract additional tourism. High hotel taxes siphon funds away from local businesses, affecting overall economic health. The complexities (dishonesty) associated with hotel sales tax in Texas and any other State that utilizes unfair taxation, impacts both operators and local economies.
48. This hotel would never have been built if the property tax did not exist, EDCs did not exist and the promoters of the PPP were held accountable and if the citizens of every community were actively involved in their civil responsibilities.  Instead, Conroe will likely be the first city in Texas to file bankruptcy.  They deserve it for the crimes against the taxpayers. The bond holders deserve to lose their entire investment because they bought into a fraud with no due diligence, promoted by every entity that touched this project.
49. Since the creation of the Federal Reserve in 1913 two horrific situations occurred. In 1914 income tax and since 1913 the purchasing power of the U.S. dollar has disintegrated 97% as a result of inflation. Inflation is a hidden tax and a fraud on society. When the U.S. went off the gold standard (true money being gold exchangeable for currency) is when the problems became abundantly clear as there were no assets backing the paper that was printed. As I have stated, the exact same situation of fraud on the public also occurred since the creation of property tax. The CADs, school districts, municipalities, all print money being your tax dollars, and place those receipts into pet projects from which there is little to no economic benefit as the compound cumulative interest on the debt places society into economic slavery. This is exactly what the Conroe Hyatt Regency is. Its bankruptcy is a forgone conclusion. The Citizens of Conroe must act to ensure that the Conroe Hyatt Regency is not their economic slavery.
50. It was stated “the value of the property is approximately $21 million. In my humble opinion the statement is wrong because there is no demand for a 4 Star or 3 Star full-service hotel and there are enough 2-star select-service hotels already in Conroe. The demand to fill the hotel even at a 2-star price simply is not there which means the cost to carry vacant rooms, restaurant, and convention space will outstrip the income even from 2-star hotel pricing. There may be an investor thinking they can buy the property by the pound out of bankruptcy and do something with the current structure, but that idea also failed in Dallas. Hyatt could not make it work, so who will loan on such another ill-conceived project?

What evidence exists that demand for a 4 Star Hotel in Conroe Texas exists? None. Without answering one simple question, the net result may be the bankruptcy of the City of Conroe.

Public Private Partnerships, Economic Development Corporations, Bond Underwriters, Rating Agencies, School Districts, CADs, ARB panels and the list of co-conspirators who write reports that are curve fitted to the intended outcome, one way or the other are defrauding the taxpaying public as can be currently seen in Conroe or the creation of “low income housing” in Dallas that costs more than new Class A multifamily (Hotel to Jail to Low Income Housing), or providing tax incentives for a manufacturing plant (Samsung) that would locate in that jurisdiction anyway, or the creation of windmill farms that would not exist but for government subsidies, etc. etc. The point being there are many cities guilty of the infrastructure allowing in unison for the crimes of fraud to be perpetrated against the taxpayers, such as PPP, EDC, CAD, School Districts, Interfund transfers, false reports, ARB panels with no authority in law or capability to determine fraud, comingling of accounts, fraudulent accounting, bond fraud, DAs refusing to prosecute. The net result by not adhering to the black letter of the law is Institutionalized Systemic Moral Hazard and as a result bankruptcies on a mass scale.

The only way to address the issues outlined herein is the repeal of all property taxes in favor of the Uniform States Sales Tax. 

Additional Information:

The Amicus Brief for Case 25-0615, Supreme Court of Texas

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